Sunday, February 14, 2016

Why Most Investors Hate Gold

The move in gold, up 17% year to date, is important, according to ConvergEx's Nick Colas...

Why Most Investors Hate Gold

We’ll be blunt: most financial asset investors really hate gold.

Anything – even leaving money in the bank – is better than owning gold since at least society has access to your capital through the banking system.  Once you buy physical gold, no one has access to that sliver of your portfolio.

Of course, that’s actually a feature for the owner since physical gold is no one else’s liability. 

So the notable rally in gold is essentially a protest vote against the global financial system, the equivalent of taking your ball and going home.

This only happens when investors think central banks have lost their way, and that’s not good news.  Think of gold as a super-duty dive watch.  It can go places humans can’t actually even dive.  The watch will outlive the person wearing it.  Kind of cool, but you don’t necessarily want to test it yourself.
Finally, Colas adds...There are three reliable signs of a market bottom, where things get so bad it is safe to step in.
First, when the S&P 500 drops 5% or more in one day.

Second, when the CBOE VIX Index tops 40.

And third, when everything sells off for a few days and correlations for all equities approaches one.

None of these events have yet occurred.
And so we wait...

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